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If 2022 was a year of restructuring for Warner Bros. Discovery, then 2023 “will be a year of relaunching and building,” WBD CFO Gunnar Weidenfels said Thursday morning.
Speaking at a Citibank conference, the executive also signaled that the company’s moves in the content space, from removing old titles from HBO Max and canceling some shows, are likely to be copied by competitors in the space, and that pricing for streaming services will rise as companies pursue profitability over reach.
On the content side, Weidenfels dismissed the “noise” around the company’s content writedowns and cancelations, calling it “a reflection of an industry that went overboard, that went on a spending frenzy,” noting that they “rectified a lot of that content exuberance, as I would call it.”
“There was a lot of thinking of, you know, let’s do more more more, not necessarily ‘let’s do the exact right things, let’s do what works,” he added. “We have the the ability, the benefit, to be Monday morning quarterbacks here.”
Indeed, he noted that “we are done with that chapter,” with regard to the purchase accounting that led the company to write down some $2.8 billion-$3.5 billion in content and development costs.
Instead, he predicts that other companies in the space will follow WBD’s footsteps in how it approaches content. While he stopped short of predicting that content spend had peaked, he did say “we shaved off a lot of the excess last year, and I think that’s something that everyone else in the industry is going to go through.”
“We’re coming from an irrational time of overspending with with very limited focus on return on investment, and I think others are going to have to make some adjustments that we frankly have behind us now,” the exec says.
“We have every intention to continue spending, content is the lifeblood of this company,” he added. “It’s obviously a hit-driven business, you win some you lose some. But if you look at the creative lineup that David [Zaslav] has been able to assemble, this is this is a first flight lineup of creative talent.”
On pricing and profitability in streaming, Weidenfels said “there’s no doubt that these products are priced way too low.”
“The idea of collapsing seven windows into one and selling it at the lowest possible price doesn’t sound like a very smart strategy. And I think there was this partly capital market-fueled phase of land grabbing, and you couldn’t lose enough money and couldn’t grow subscribers fast enough. I think that’s behind us,” he added. “If you look at trend lines over the past 20 or 36 months, a number of players have started gradually bringing up prices. So I think there’s a building consensus that this phase of dumping pricing is over.”
Elsewhere, Weidenfels said that the company closed new linear distribution deals for about 30 percent of its footprint last year, and said that the company retained more House of the Dragon on HBO Max adds than originally modeled.
And of course the company will launch its combined streaming service and a free ad-supported streaming option, which he suggested will put the company back on a growth path.
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